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CML says lenders’ arrears charges are fair

The Council of Mortgage Lenders says it is fair for lenders to charge customers when they fall in arrears to cover the cost of the extra work being carried out.

The Treasury Select Committee’s report on mortgage arrears, published today, says some lenders are using arrears charges as an alternative profit stream.

But the CML says: “It is important to recognise there is a cost to the lender for the additional work when managing mortgages that go into arrears and it is fair to charge for that work.

“Lenders need to employ staff to liaise with borrowers, to monitor the ongoing situation, and they may also incur legal costs. If lenders do not charge the borrowers who are in difficulty for these costs, they would be borne by all customers. Each firm’s cost base will differ so it is not straightforward to say a specific figure is fair or that higher charges are unfair.”

The CML says lenders are showing “significant forbearance” to borrowers facing temporary difficulties, to enable them to keep their homes where this is possible.

But it agrees that the FSA should take action “in the small minority of cases where there are any legitimate findings of poor practice”.

CML head of policy Jackie Bennett says: “The industry is fully engaged to help its customers through the recession where they have a good prospect of being able to get back on track and sustain their home-ownership in the long term. Repossession remains a last resort.

“Lenders have worked hard to ensure that treating customers fairly is at the centre of their arrears management. This doesn’t necessarily mean that consumers won’t be charged, but it does mean that the charges will be a reasonable reflection of costs and that they will be applied in ways designed not to exacerbate the borrower’s financial problems.”

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